SVS Securities administrators expect full return to clients in respect of custody assets and client money

Maria Nikolova

The exceptions relate to a very small number of clients whose losses exceed the FSCS’ compensation limit of £85,000 per claimant.

The administrators of SVS Securities plc, an investment firm offering broker-dealer and discretionary managed services, have earlier this week published a report providing clients and creditors with an update on the progress of the Special Administration of the company for the six month period from August 5, 2019 to February 4, 2020.

The Administrators anticipate that, other than a very small number of exceptions, there will be a full return to clients in respect of custody assets and client money. The exceptions relate to a number of Clients who may not be eligible to receive compensation in respect of any shortfalls arising out of specific arrangements between the clients in question and the company and costs from the Financial Services Compensation Scheme (FSCS) or whose losses exceed the FSCS’ compensation limit of £85,000 per claimant.

The Administrators have secured client money of approximately £24.9 million, in full, from across 20 pre-appointment bank accounts.

The Administrators initially estimated that SVS Securities had approximately 21,000 clients, however, after conducting further analysis on the client and account base that is held across three different IT platforms, the Administrators identified a number of clients holding multiple accounts with the company. This further analysis has identified approximately 19,200 unique clients. The custody assets and client money are held by a mixture of execution only, discretionary and FX clients. As at August 5, 2019, SVS’s account base comprised 14,855 equity accounts (including 773 discretionary accounts), 10 prime broker accounts and 6,547 FX accounts.

Approximately 500 of SVS’s FX clients and 30 of its advisory clients were classified as elective professional clients (“EPC”) and entered into terms with the company which created title transfer collateral arrangements with respect to the treatment of those EPCs’ monies. The effect of the title transfer arrangements was that monies deposited with the company by those EPCs were not treated as client money subject to the FCA’s rules and, instead, formed part of the company’s own house monies.

According to SVS’s records, the aggregate amount owed by the company to the FX EPCs is approximately USD 4.6 million, and the aggregate amount owed by the company to the advisory EPCs is £206,000.

On November 1m 2019, the FSCS posted an update on their website regarding the status of the company’s EPCs, confirming that eligible EPCs (i.e. individuals and small businesses) will be protected by FSCS compensation up to the FSCS compensation limit of £85,000 per claimant.

The Administrators says they are currently liaising with the FSCS regarding payment of that compensation. At this stage EPCs do not need to do anything. They will be contacted in due course when the Administrators receive confirmation from the FSCS as to how claims for compensation for eligible EPCs will be administered.

Clients who have not already submitted their claims are advised to do so as soon as possible. The extended deadline for clients to submit their claims to Custody Assets and Client Money expired on February 6, 2020. Although the Administrators anticipate that the Client Portal will remain open for a further period of time, any clients who have not submitted a claim via the Client Portal are encouraged to do so as soon as possible, or where invited to do so by the Administrators, as the Administrators anticipate closing the Client Portal for the submission of claims to Client Assets in the coming weeks.

Clients who have not submitted a claim via the Client Portal and any clients who submitted a claim following the expiry of the February 6, 2020 deadline, when making distributions and/or transferring Client Assets to a regulated broker, the Administrators will make allowance for those Clients’ entitlements to Client Assets based on SVS’s records when effecting any transfer or distribution.

As FinanceFeeds has reported, the Administrators have been working to identify an appropriate single broker to whom the Custody Assets and Client Money held by SVS can be transferred. The Administrators have selected a preferred broker for the transfer and Heads of Terms have been agreed. The Administrators are working closely with the broker to agree the terms, and the operational mechanics, of the transfer of all client accounts.

Regarding any distribution, the Administrators’ current expectation is that an application to approve their Distribution Plan will be made to the Court in April 2020.

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